NOT TO BE PUBLISHED
Marin County Super. Ct. No. CV 024679
These appeals arise out of a dispute over a subdivision in respondent City of Novato (City). Pursuant to a series of agreements, the owners and developers of the subdivision—appellants MCCE Development, LLC, and MCCE Investors, LLC (collectively, MCCE)—agreed to build streets and other improvements to support the development of seven homes, to repair and restore a creek that runs through the subdivision, and to preserve the balance of the subdivision as open space. During the course of the dispute MCCE conveyed four buildable lots to a third party, appellant George Morf.
On the court’s own motion, we consolidate the appeals in case numbers A116957 and A120137 for purposes of decision.
MCCE and Morf appeal from a judgment awarding the City specific performance of the agreements. We conclude there was no abuse of discretion in directing specific performance by MCCE. However, it was error to order specific performance by Morf, who is not a party to the agreement to construct improvements and repair the subdivision property. His liability results from a covenant running with the land he owns. We remand for the limited purpose of reconsidering the scope of the remedy as to Morf.
In a separate appeal we have consolidated with the appeal from the judgment, MCCE and Morf challenge an award of attorney fees in favor of the City. We reverse the fee award as to Morf, who is not a party to the agreement containing the attorney fee clause, and we remand the matter for reconsideration of the award in light of our disposition as to Morf.
Factual and Procedural Background
Marin Country Club Estates – Unit 3
The subdivision involved in this case is known as Marin Country Club Estates – Unit 3 (Subdivision) and consists of 54 acres. In 1992, the City approved an agreement to develop the property submitted by an entity known as Faircanco, Inc., which agreed to complete all necessary public improvements associated with the Subdivision within two years. The original proposal called for the development of 37 homes. When Faircanco, Inc. failed to undertake the required improvements, the City began the process of reverting the property to acreage, a process by which the subdivided lots would revert to a single parcel. (See Gov. Code, § 66499.11 et seq. [describing procedures for reverting subdivided lands to acreage].)
In 1997, Daniel Morgan approached the City about pursuing development of the Subdivision. Morgan, a developer, is president of Centennial Homes Inc. (Centennial), whose sole purpose is to be a general contractor for subdivisions built by Morgan and his related business entities. On December 8, 1998, Centennial and the City agreed to delay the reversion-to-acreage process in order to give Centennial time to formulate a proposal to develop the property. Morgan represented that he would fix drainage problems on the Subdivision property, develop seven of the lots on nine acres, and convey the balance of the Subdivision, or 45 acres, to the Marin County Open Space District (Open Space District) to be preserved as open space. In late December 1998, Morgan reached an agreement to purchase the entire Subdivision for $200,000.
The Open Space District is a Marin County agency formed in 1972 in order to acquire and preserve land for open space.
Centennial, Morgan, and another individual, Mark Cunningham, created the MCCE entities to take title to the property and undertake development of the Subdivision. MCCE Development, LLC (MCCE Development) is a limited liability company whose members are Centennial and Cunningham. MCCE Investors, LLC (MCCE Investors) is a limited liability company whose members are Morgan and Cunningham. MCCE Development took title to lots 1 through 7 of the Subdivision with the intent of developing those parcels. MCCE Investors took title to lots 8 through 37 with the intent of holding the property for a minimum period of one year and then donating it to the Open Space District as a charitable contribution. Except where necessary to distinguish between MCCE Development and MCCE Investors, we shall refer to the two entities collectively as MCCE.
The City Attorney, Jeffrey Walter, sent Morgan’s attorney a single, proposed Subdivision Improvement Agreement (SIA) covering the entire project proposed by Morgan. However, Morgan sought to derive a tax advantage from the transaction and proposed that it be broken into three separate agreements to accomplish that purpose. The City accommodated Morgan’s request and agreed to memorialize the transaction in three documents referred to in this opinion as SIA 1, SIA 2, and SIA 3.
As more fully explained below, SIA 1 concerns the development of lots 1 through 7. SIA 2 concerns lots 8 through 37 and gives MCCE the option to transfer the lots to a preservation organization such as the Open Space District. SIA 3 concerns the dedication of land for a park but comes into effect only if lots 8 through 37 are ultimately developed. SIA 3 is not at issue in this litigation.
SIA 1 is a July 13, 1999, agreement between MCCE Development and the City concerning lots 1 through 7. It obligates MCCE Development to construct all improvements needed to support the development of lots 1 to 7 of the Subdivision, including grading, storm drainage, streets, street lights, utilities, and landscaping. In addition, SIA 1 requires MCCE Development to undertake “creek repair, including off-site improvements.” “Creek repair” entails repairing and restoring the two forks and the main stream of the Arroyo San Jose creek, which runs through the Subdivision. MCCE Development agreed that all plans would be constructed in accordance with the City’s Municipal Code. Further, because the required work includes restoration and drainage control on Arroyo San Jose creek, MCCE Development agreed that it would obtain all necessary approvals for the work from the California Department of Fish and Game, the U.S. Army Corps of Engineers, the Regional Water Quality Control Board (RWQCB), the Marin County Flood Control District, and “all other agencies with jurisdiction.” SIA 1 required MCCE Development to complete the improvements and creek restoration work within two years.
MCCE Investors is not listed as a party to SIA 1. Nevertheless, in a section of SIA 1 entitled “Consent,” MCCE Investors consented to be bound by the terms and conditions of SIA 1.
In the event MCCE Development breached SIA 1 by failing to complete the work, the City had the option of requiring MCCE Development’s surety to take over and complete the work. If the surety failed to commence performance under SIA 1, the City could opt to take over the work and pursue it to completion with a new contractor or any other method deemed advisable, all at the expense of MCCE Development and its surety. Alternatively, in the event of a breach, the City had the option of initiating proceedings to revert the entire Subdivision to acreage.
SIA 2 is a July 13, 1999, agreement by and among MCCE Development, MCCE Investors, and the City concerning lots 8 through 37. Under SIA 2, MCCE Investors had the option to complete improvements necessary to develop lots 8 through 37 by June 1, 2000. In the event MCCE Investors did not complete the improvements associated with lots 8 through 37 within the designated time, SIA 2 obligated MCCE Investors to take a “Preservation Action” with respect to the lots. MCCE Investors could fulfill its obligation to take a Preservation Action by allowing lots 8 through 37 to revert to acreage, i.e., revert to a single parcel. Alternatively, MCCE Investors could elect to transfer the lots to an organization dedicated to the preservation of open space. SIA 2 required the preservation organization to provide reasonable assurances the lots would remain in their undeveloped state in perpetuity.
From the outset, there was no intention to develop lots 8 through 37. It was always the intent of MCCE Investors to transfer lots 8 through 37 to an organization dedicated to preserving open space. The parties included a provision allowing the property to be developed by June 2000 merely to assist MCCE Investors in obtaining a tax benefit. According to Morgan, the option of reverting the lots to acreage was included in SIA 2 in the event the Open Space District refused to accept all or some portion of the lots.
Both SIA 1 and SIA 2 contain cross-breach provisions providing that a breach of one SIA constitutes a breach of the other.
Performance under SIA 1
MCCE Development began constructing the improvements required by SIA 1 in 1999. In the winter of 2000-2001, a slowly progressing landslide occurred on lot 25. The landslide caused debris and sedimentation to flow into the creek toward downstream properties.
The RWQCB investigated the creek repair work and, on November 9, 2001, issued a Notice of Violation against MCCE and the City requiring repair of the creek. The Notice of Violation alleged that both MCCE and the City had violated the terms of waivers granted by the RWQCB.
By March 2002, MCCE Development had completed the infrastructure improvements associated with lots 1 through 3 and was in the process of completing construction on the homes on those lots. Ultimately, MCCE sold the homes on lots 1 through 3 for an aggregate sales price of over $3.8 million. The City agreed to extend the time for completion of MCCE’s obligations under SIA 1 on five occasions. The Fifth Amendment to SIA 1 extended the deadline to complete the improvements to August 1, 2002. The Fifth Amendment to SIA 1 also directed MCCE to remove a gate blocking vehicular access to lots 4 to 7.
On December 10, 2002, the City Council passed a resolution declaring MCCE in breach of SIA 1. A letter from the City Attorney to MCCE Development dated December 23, 2002, stated that MCCE was in breach of SIA 1 because it had failed to timely complete creek restoration work, had failed to construct the improvements required by SIA 1, and, as a result of the landslide caused by MCCE’s work, had breached the warranty that its work would not adversely affect any portion of adjacent property. The City Attorney further declared that MCCE Development had breached SIA 1 because its surety was insolvent. The City Attorney explained that any breach of SIA 1 is deemed a breach of SIA 2, and advised MCCE Development of its intent to begin the process of reverting lots 4 through 37 to acreage.
Later that month, on December 31, 2002, MCCE Development transferred lots 4 through 7, which remained undeveloped, to George Morf. Morgan described the transaction with Morf as follows: (1) Morgan would lend Morf $5,000; (2) Morf would pay the $5,000 for title to lots 4 through 7; (3) Morf would assume the existing indebtedness on lots 4 through 7, totaling $938,000; (4) MCCE Development would make all mortgage and tax payments associated with lots 4 through 7; and (5) MCCE Development would hold an option, with no termination date, to repurchase lots 4 through 7 for $5,000, as long as MCCE Development made the mortgage payments and paid the taxes. Thus, Morf paid no money out of pocket to purchase lots 4 through 7 and was not obligated to make mortgage payments or pay taxes on the property as long as MCCE Development did so and retained its repurchase option.
Morgan testified he had a letter agreement with Morf outlining the terms of the transaction. That letter agreement is not included in the record on appeal.
Morgan told Morf that the SIA’s were recorded against the property and that anyone who purchased the property took subject to the SIA’s. Morgan also disclosed that the City had found MCCE in default under the SIA’s and that the City Attorney had advised MCCE of its intention to revert lots 4 through 7 to acreage.
Performance under SIA 2
As anticipated, MCCE Investors chose not to develop lots 8 through 37. MCCE Investors commenced negotiations with various organizations, including the Open Space District, to donate lots 8 though 37 under the terms of SIA 2. In July 2001, MCCE Investors made a formal offer to transfer lots 8 through 37 in fee to the Open Space District. As part of its offer, MCCE Investors agreed to repair the landslide on lot 25. However, the transfer offer required that the Open Space District indemnify MCCE, Morgan, and others against any liability resulting from flooding, sedimentation, or runoff affecting downstream property owners. The Open Space District declined the offer in September 2001, stating that it was not in the Open Space District’s best interests to accept the property in light of the potential for ongoing litigation involving downstream property owners and liability associated with improvements on the lands.
In March 2002, the City and MCCE entered into the First Amendment to SIA 2, which amended SIA 2 to provide that MCCE Investors could satisfy its obligation to take a Preservation Action by either (1) allowing a reversion of lots 8 through 37 to acreage, which had already been an option, or (2) by delivery of an Irrevocable Transfer Agreement (ITA) to the Open Space District. The ITA was an irrevocable offer by MCCE to transfer lots 8 through 37 to the Open Space District either by fee or by conservation easement. The ITA provided that fee title to lots 12 through 14, 19 through 24, and portions of lots 17 and 18 would be transferred to the Open Space District. With respect to lots 8 through 11, 15 and 16, 25 through 37, and portions of lots 17 and 18, MCCE would retain title but would grant a conservation easement to the Open Space District. The agreement was structured so that only those parcels outside the areas affected by the landslide or the creek would be transferred in fee to the Open Space District.
MCCE Investors chose to execute and deliver the ITA to the Open Space District. Under the First Amendment to SIA 2, MCCE Investors was obligated to execute the deeds and conservation easements attached to the ITA and deliver them to the Open Space District by December 31, 2002. Additionally, MCCE Investors was obligated to close escrow within one year of the execution of the ITA. Under the terms of the ITA, MCCE agreed to grant a 20-foot wide easement to the Open Space District for the purpose of permitting public access to the property, with the ultimate location of the easement to be determined by the Open Space District.
The ITA specified that the term of the agreement was for 365 days, during which period the agreement constituted an irrevocable offer by MCCE Investors to convey the property to the Open Space District under the terms and conditions set forth in the ITA. Although the ITA was an agreement between MCCE Investors and the Open Space District, the ITA specified that the agreement and its implementation were “an integral and necessary part of MCCE’s performance under certain Subdivision Improvement Agreements entered into by and between the City and MCCE in 1999.” Consequently, the parties to the ITA expressly acknowledged that the City was an intended third-party beneficiary of the agreement with power to enforce its terms. In addition, the First Amendment to SIA 2 provided that any failure by MCCE Investors to timely comply with its obligations to take a Preservation Action would constitute a material breach of the agreement.
In November 2002, the Open Space District presented MCCE Investors with transfer documents that specified an access easement over lot 7, which MCCE claimed made it impossible to build on the land. MCCE objected to the Open Space District’s attempt to take part of lot 7 as an access easement. In addition, MCCE sought to impose additional terms not included in the ITA, including requiring the Open Space District to indemnify MCCE for sediment transfer and to execute a maintenance agreement for the streambeds. The Open Space District sought clarification with regard to the access easement but otherwise rejected the additional terms not contained in the ITA. MCCE Investors never complied with the ITA and failed to convey to the Open Space District fee title or conservation easements to lots 8 through 37.
MCCE commenced this action on September 13, 2002, by filing a complaint against the City for breach of contract, among other causes of action. MCCE alleged the City had breached its agreements with MCCE by requiring MCCE Development to remove a security gate contemplated by the project plans. MCCE also alleged the City had improperly withheld final approval of the completed work and improvements. A first amended complaint added claims relating to the landslide and the RWQCB Notice of Violation.
On January 16, 2003, the City filed a cross-complaint against MCCE Development and MCCE Investors, as well as Morgan and Cunningham, the individual members of the MCCE entities. The City alleged that the cross-defendants had breached SIA 1 by failing to construct required improvements, by failing to repair and restore the creek, by failing to take corrective action to remedy the RWQCB Notice of Violation, by failing to remediate the landslide, and by failing to remove the gate across a public right of way. The City alleged that the cross-defendants had breached SIA 2 as a consequence of their breach of SIA 1. The City sought specific performance of the SIA’s. In the alternative, it sought damages. It also sought an injunction requiring the cross-defendants to remove the gate, which was alleged to constitute a trespass across a public right of way.
A first amended cross-complaint added Centennial as a cross-defendant. In addition, the first amended cross-complaint added a cause of action for breach of certain Cost Recovery Agreements obligating the cross-defendants to reimburse the City for the cost of processing land use applications and other permits related to the Subdivision. The first amended cross-complaint also added a cause of action for the unlawful distribution of limited liability company assets. On December 6, 2004, the City amended its first amended cross-complaint by substituting Morf as a cross-defendant in place of a fictitiously named Doe cross-defendant.
The Cost Recovery Agreements are not at issue in this appeal.
MCCE Development filed a separate cross-complaint against the project grading contractor, Maggiora & Ghilotti, asserting causes of action related to the landslide. MCCE Development negotiated a settlement of $865,000 against a number of parties, including Maggiora & Ghilotti, and dismissed the cross-complaint.
MCCE filed a number of other lawsuits against the City, including a lawsuit challenging the City’s resolution declaring MCCE in default under the SIA’s, and a lawsuit challenging the City’s attempt to revert lots 8 through 37 to acreage.
Before trial, MCCE Investors and MCCE Development dismissed their complaint against the City. The City’s case against MCCE, Centennial, Morgan, Cunningham, and Morf proceeded to trial in March 2006. The City’s legal claims for monetary damages and its equitable claims were tried simultaneously before a jury and the court.
The jury returned a special verdict finding that MCCE Development, MCCE Investors, and Morf had breached both SIA 1 and SIA 2, as amended. The jury also determined, however, that the total amount of damages caused by the breach of SIA 1, as amended, including damages for “slide repair” and “creek restoration” was “$0.” The jury thus awarded no damages for the breach. The jury further found that MCCE Development had breached the Cost Recovery Agreements and awarded damages of $44,772. The jury reached a defense verdict with respect to Morgan and Centennial, finding that they had not breached the Cost Recovery Agreements.
Following the jury’s verdict, the court invited the parties to brief the issues concerning the equitable remedies sought by the City. After a series of hearings, the court rendered an oral decision granting the City’s motions for specific performance of SIA 1 and SIA 2, and directing removal of the gate.
The court filed a statement of decision and judgment on January 18, 2007. With respect to SIA 1, the court directed that MCCE and Morf “complete, at their cost, all improvements, outlined and set forth in the Reference Plans..., which shall include the necessary slide repair and creek restoration work....” The court found Morf liable under SIA 1, reasoning MCCE Development conveyed lots 4 through 7 to him pursuant to an agreement that had been described at trial by Morgan. The court further reasoned that the obligations of SIA 1 run with the land and bind MCCE’s successor in interest. The court concluded Morf was a “successor or assign of the original parties to the contract.”
With regard to SIA 2, the court ordered MCCE Investors to deliver “transfer documents, in recordable form, which convey to the [Open Space] District property interests in lots 8-37... consistent with the March 26, 2002, Irrevocable Transfer Agreement....” The court directed that a 20-foot-wide access easement be conveyed to the Open Space District that does not unreasonably restrict the right of MCCE Investors or Morf to build upon lots not conveyed as property interests to the Open Space District.
The court further ordered that MCCE and Morf remove and dispose of the gate blocking vehicular access to lots 4 through 7. The court also ordered the City to counter-perform its obligations under SIA 1 and SIA 2, indicating the court contemplated that, “upon appropriate and substantial resolution of the landslide and creekside repairs, approval of cross-defendants’ building plans and permits will not be unreasonably withheld.” Finally, the court entered judgment in the City’s favor against MCCE Development for $44,772, reflecting the jury’s award on the Cost Recovery Agreements. MCCE and Morf timely appealed the judgment.
Following entry of the judgment, the parties filed cross-motions seeking attorney fees. In an order filed September 30, 2007, the court found that the City, Centennial, Morgan, and Cunningham were prevailing parties under the SIA’s and the Cost Recovery Agreements. The court awarded the City a total of $526,713 in attorney fees, composed of $508,084 in fees related to the SIA’s, and $18,629 in fees associated with the Cost Recovery Agreements. Conversely, the court awarded Morgan, Centennial, and Cunningham $50,000 in attorney fees as the prevailing parties on the SIA’s and the Cost Recovery Agreements. The court deducted the fees awarded to Morgan, Centennial, and Cunningham from the City’s total fee award, leaving the City a net attorney fee award of $476,713. MCCE and Morf timely appealed the court’s order awarding attorney fees.
I. Specific Performance of SIA’s
A. Standard of Review
We review an order granting specific performance for abuse of discretion. (Real Estate Analytics, LLC v. Vallas (2008) 160 Cal.App.4th 463, 472.) “ ‘The appropriate test for abuse of discretion is whether the trial court exceeded the bounds of reason. When two or more inferences can reasonably be deduced from the facts, the reviewing court has no authority to substitute its decision for that of the trial court.’ [Citation.]” (In re Stephanie M. (1994) 7 Cal.4th 295, 318-319.) It is the appellant’s burden to establish an abuse of discretion. (Blank v. Kirwan (1985) 39 Cal.3d 311, 331.)
B. Specific Performance of SIA 1
The trial court ordered MCCE and Morf to complete the improvements required under SIA 1, including infrastructure work, slide repair, and creek restoration. MCCE and Morf argue that this order of specific performance constitutes an abuse of discretion because the City had an adequate remedy at law for a breach of the agreement. Further, they contend specific performance is unavailable because SIA 1 is a construction contract that will require continuous judicial supervision. For the reasons that follow, we conclude the trial court did not abuse its discretion in directing specific performance of SIA 1, at least as to MCCE.
As explained in section I.C., post, because Morf is not a party to SIA 1, it was error to order him to specifically perform SIA 1, except to the extent his obligations arise from covenants running with the land and are in proportion to his property interest.
1. Inadequate Remedy at Law
“To obtain specific performance after a breach of contract, a plaintiff must generally show: ‘(1) the inadequacy of his legal remedy; (2) an underlying contract that is both reasonable and supported by adequate consideration; (3) the existence of a mutuality of remedies; (4) contractual terms which are sufficiently definite to enable the court to know what it is to enforce; and (5) a substantial similarity of the requested performance to that promised in the contract. [Citations.]’ [Citations.].” (Real Estate Analytics, LLC v. Vallas, supra, 160 Cal.App.4th at p. 472.)
In reaching its conclusion that damages were an inadequate remedy, the trial court reasoned as follows: “The [jury’s] finding of zero damages reflects either the jury’s unwillingness to award damages or its dissatisfaction with an award of damages for the breach of the contract or the difficulty in assessing damages in this case based on the varying testimony of the witnesses. The Court understands the problems that the jury faced and faces a similar frustration with any award of damages or any restriction of the parties to their bargained reversion-to-acreage.... After consideration of all the evidence (which included obtaining the necessary approvals from governmental entities and regulatory agencies before the work required under [SIA 1] could be completed, which approvals [MCCE] had not received but claimed they were in the process of obtaining), the Court finds that damages were too difficult to assess or otherwise inappropriate and will not disagree with the jury’s decision. The Court notes that the jury raised issues with the damage remedy in questions submitted to the Court during the jury’s deliberations. The court finds that a damage remedy will not provide a full and adequate or complete remedy for a breach of [SIA 1], as amended, and therefore, specific performance of [SIA 1], as amended, is not precluded and is an appropriate remedy. [Citation.]”
According to MCCE and Morf, the City’s legal remedy was not rendered inadequate simply because the jury refused to award damages. In support of their position, they cite the following from Allan Block Corp. v. County Materials Corp. (7th Cir. 2008) 512 F.3d 912, 919 (Allan Block): “The fact that a jury awards zero damage does not mean that damages could not be calculated and so could not provide an adequate remedy; it could just mean that the plaintiff was not injured. To allow a plaintiff to base a claim for an injunction on an adverse jury verdict would be topsy-turvy. [Citation.]” However, the Allan Block court went on to state there is “nothing to prevent a plaintiff from seeking both damages and injunctive relief in the same case and trying to prove that his failure to obtain damages was due not to his failure to prove injury but rather to the difficulty in quantifying the damages resulting from the injury.” (Ibid.)
Although we are not bound to follow Allan Block, the analysis by the Seventh Circuit Court of Appeals in that case is nonetheless instructive. The plaintiff in Allan Block sought damages and injunctive relief for an alleged violation of a covenant not to compete during the life of a contract and for 18 months after its termination. (Allan Block, supra, 512 F.3d at pp. 914-915.) A jury awarded the plaintiff $290,000 for pre-termination damages and zero damages for the post-termination period of time. The trial court also awarded injunctive relief extending the post-termination covenant period. (Id. at pp. 918-919.) The Seventh Circuit reversed the injunction, noting the trial court had failed to make findings supporting that relief. (Id. at p. 919.) In addition, because the jury had awarded pre-termination damages, the best interpretation of the zero damage award for the post-termination period was that the plaintiff had failed to prove it sustained any post-termination damages. (Id.) Thus, the zero damage award did not demonstrate difficulty in determining damages but instead showed the plaintiff suffered no injury.
Here, the trial court’s determination that the City had an inadequate remedy at law did not rest on the jury’s refusal to award damages, as MCCE and Morf claim. Instead, the court made an independent assessment that damages were too difficult to ascertain, an assessment that was consistent with a reasonable inference that can be drawn from the jury’s verdict in light of the evidence. Furthermore, the court made specific findings to support an award of equitable relief, as contemplated by the court’s analysis in Allan Block.
Citing Thayer Plymouth Center, Inc. v. Chrysler Motors Corp. (1967) 255 Cal.App.2d 300, 307, MCCE and Morf argue that damages are not inadequate simply because they are difficult to measure. We agree that a legal remedy should not be considered inadequate simply because the calculation of damages involves some uncertainty. Nevertheless, even the authority relied upon by MCCE and Morf acknowledges that a legal remedy may be inadequate if monetary damages are “ ‘extremely difficult to ascertain.’ ” (Ibid.)
MCCE and Morf contend that damages are routinely awarded for such items as pain and suffering and emotional distress, which are purportedly more difficult to ascertain than the damages for breaching SIA 1. The comparison is inapt. Specific performance is not available as an alternative to an award of tort-based damages for emotional distress or pain and suffering.
Evidence at trial established the extreme difficulty in ascertaining damages. The City’s expert testified he estimated the cost of the required work at $706,000 but admitted it could not even be put out for bid because no permits had been issued for the work. He based his estimate on various contingencies and assumptions about approvals that had yet to be obtained, and admitted his estimate was “speculative at this point.” Morgan, MCCE’s principal, testified his estimates showed the same work would cost approximately $312,800. Yet even MCCE admits that all the cost estimates “assumed that all necessary permits would issue and that the work could proceed as then currently planned.” The evidence presented at trial establishes why estimates premised on these assumptions were speculative.
Morgan testified repeatedly about the difficulties in obtaining governmental permits and approvals of plans. He explained that any improvements required the coordination of five government agencies that often had opposing interests. MCCE was unable to complete work on the creek and landslide repair because it had not yet obtained permits from the RWQCB and other agencies. At the time of trial, MCCE had no plans for repair of the south and north fork of the Arroyo San Jose creek, and its plans for repair of the main trunk of the creek had yet to be approved. In addition, although MCCE had developed plans to fix the landslide, MCCE’s engineer did not know what happened to those plans or whether they had been approved. The City’s engineer testified that no plans to repair the landslide had been submitted to the City for review.
In short, there was extreme uncertainty about the scope and extent of the work that remains to be done. In some cases a repair plan had yet to be formulated, and in other cases in which a plan had been prepared or submitted to the appropriate agency, there was substantial uncertainty about whether the plan would be approved as proposed. Under the circumstances, the trial court had good reason to conclude that damages were too difficult to assess or were otherwise an inappropriate remedy for the City.
We are guided by the analysis in Tamarind Lithography Workshop, Inc. v. Sanders (1983) 143 Cal.App.3d 571 (Tamarind). In that case, Sanders produced and directed a film and claimed he was not given proper screen credit after the film was distributed. He sought damages for breach of contract as well as specific performance of the contract to give him screen credit. (Id. at p. 573.) After the jury returned a verdict of $25,000 in damages, the trial court denied the request for specific performance, reasoning that the jury’s verdict awarded Sanders all the relief he was entitled to for past and possible future damages. (Id. at pp. 573, 575.) The appellate court reversed, holding that despite the jury’s award of damages, the legal remedies available to Sanders for harm resulting from future exhibitions of the film were inadequate for two separate reasons: “(1) that an accurate assessment of damages would be far too difficult and require much speculation, and (2) that any future exhibitions might be deemed to be a continuous breach of contract and thereby create the danger of an untold number of lawsuits.” (Id. at p. 575.) The court reached this conclusion despite the fact experts offered opinions that Sanders’s damages could be quantified in monetary terms between $50,000 and $150,000. (Id. at p. 577, fn. 6.) The appellate court concluded the jury’s damages award compensated Sanders for past harm but that equitable relief in the form of specific performance was required to prevent future injury. (Id. at p. 578.)
In this case, just as in Tamarind, an accurate assessment of damages is far too difficult and would require substantial speculation, notwithstanding the fact that experts attempted to offer estimates of the future cost of repairing the Subdivision. Unlike in Tamarind, there is no possibility of a double recovery because the City received no damages for breach of SIA 1. We conclude there was no abuse of discretion in ordering specific performance of SIA 1.
Because we conclude that damages constitute an inadequate legal remedy, we need not address the City’s alternative contention that SIA 1 was specifically enforceable as part of an agreement to transfer real property. We observe that the trial court did not order specific performance of SIA 1 based upon a determination that SIA 1 concerned or was incident to an agreement to transfer real property. Instead, to the extent the trial court discussed the statutory presumption that damages are inadequate to remedy a breach of an agreement to transfer real property (see Civ. Code, § 3387), it did so in connection with its discussion of SIA 2.
2. Continuous Judicial Supervision
MCCE and Morf characterize SIA 1 as a construction contract that is not a proper subject of an order of specific performance. They contend that specific performance of the agreement would require constant court supervision of the relationship among the parties. We disagree with the proposition that the need for continued judicial supervision necessarily precludes an award of specific performance.
“An archaic doctrine denies specific performance of contracts that call for a series of acts requiring continuous supervision, such as agreements for construction and repair.” (13 Witkin, Summary of Cal. Law (10th ed. 2005) Equity § 45, p. 337.) “The better modern cases and other authorities reject this doctrine and give specific performance whenever it is practically feasible. [Citations.]” (Ibid.)
In Okun v. Morton (1988) 203 Cal.App.3d 805, 820-821 (Okun), the court noted the continuous judicial supervision doctrine has been “soundly criticized” but also observed the doctrine’s application was generally “limited to building construction contracts and distribution or sales agency agreements. [Citation.]” The court concluded the doctrine did not preclude specific performance of a contract governing capital contributions and expenses in a joint business venture. (Id. at p. 821.) The contract did not involve “day-to-day management” of the business “that would require the close and ongoing cooperation of the parties or the court.” (Ibid.)
MCCE and Morf seize on the reference in Okun to building construction contracts, arguing that construction contracts are not subject to specific performance even under more recent California case authority. Okun does not stand for such a categorical rule prohibiting specific performance of construction contracts. Instead, it appears the court was simply describing how the traditional rule had typically been applied. Moreover, California courts have upheld the specific performance of contracts involving ongoing construction work. (See, e.g., Ellison v. Ventura Port District (1978) 80 Cal.App.3d 574, 580-581 [periodic dredging of marine channel]; Bakersfield Country Club v. Pacific Water Co. (1961) 192 Cal.App.2d 528, 539 [installation of pipeline in subdivision].) A construction contract may be specifically enforced so long it is practically feasible do so and the requisites for specific performance are otherwise satisfied.
Specific performance of SIA 1 does not enmesh the court in the day-to-day dealings of the parties. MCCE and the City will necessarily have some periodic dealings with one another, such as when MCCE seeks certain approvals and permits. But there is nothing to suggest their dealings will be so extensive as to require cooperation on an ongoing, daily basis, as might be expected among parties compelled to operate a business together.
MCCE and Morf argue that specific performance of SIA 1 amounts to an abuse of discretion because third-party approvals will be required over which the court has no control. They also point out that the City has the ultimate authority over necessary approvals, and claim they could be held in contempt for reasons outside their control if approvals are withheld. MCCE and Morf’s concerns are unwarranted.
The fact that a contract requires a public entity’s approval of development plans does not preclude specific performance of the contract. (Bleecher v. Conte (1981) 29 Cal.3d 345, 354.)
MCCE or Morf cannot be held in contempt if they are prevented from performing their obligations as a result of the unreasonable conduct of third parties. (Cf. Conn v. Superior Court (1987) 196 Cal.App.3d 774, 784 [contempt requires ability to comply with order and willful disobedience].) Furthermore, because the court has continuing equitable jurisdiction over the City to enforce the specific performance decree, it has the power to remedy any unreasonable actions that may be taken by the City.
It is difficult to imagine any scenario that would eliminate the need for the parties to have some form of ongoing relationship or to secure third-party approvals. The creek and landslide repairs will need to be performed regardless of who takes primary responsibility for those tasks. The affected properties will continue to be owned by MCCE, Morf, or their successors, who will obviously have an interest in any repair work that will be performed on properties they own. Thus, it seems unlikely the parties (or their successors) will be able to avoid the third-party approval process that MCCE and Morf claim renders the order of specific performance unworkable.
The trial court was well aware its order would require some ongoing supervision, but it concluded there was “no other viable remedy.” The court did not abuse its discretion in arriving at that conclusion.
C. Morf’s Liability Under SIA 1
The trial court ordered Morf, as well as MCCE, to specifically perform SIA 1. The court explained the basis for Morf’s liability as follows: “Morf is bound by the terms and conditions of [SIA 1], as a successor or assign of the original parties to the contract. The court reads ¶ 13.B of [SIA 1] as applying to the entire agreement and has considered it as a covenant running with the land, thus binding Morf.” Thus, the court offered two different grounds to impose obligations under SIA 1 upon Morf—either as an assignee of MCCE, and thus a party to the contract, or as a property owner bound to perform obligations under SIA 1 to the extent they constitute covenants running with the land.
Morf contends he is not an assignee under SIA 1, both because there was no assignment of SIA 1 and because the City never consented to any purported assignment. He also argues that any covenant or equitable servitude arising out of SIA 1 is limited to the City’s right to convert the lots to acreage but nothing more.
As explained below, we conclude there was no contractual assignment of SIA 1 to Morf. However, we also conclude Morf is bound to comply with SIA 1 to the extent its obligations comprise covenants running with the land or equitable servitudes. Although it may appear at first glance that our analysis yields the same outcome the trial court reached, the scope of the remedy for breach of a covenant running with the land is narrower than the remedy for breach of contract, at least under the facts presented here.
1. Contractual Assignment
A contract is ordinarily “assignable unless it calls for some personal quality of the promisor, or unless it expressly or impliedly negatives the right to assign.” (1 Witkin, Summary of Cal. Law, supra, Contracts § 712, p. 798.) “While no particular form of assignment is necessary, the assignment, to be effectual, must be a manifestation to another person by the owner of the right indicating his intention to transfer, without further action or manifestation of intention, the right to such other person, or to a third person. [Citations.]” (Cockerell v. Title Ins. & Trust Co. (1954) 42 Cal.2d 284, 291.) The parties’ intention is determined by considering their words and acts as well as the subject matter of the contract. (Lumsden v. Roth (1955) 138 Cal.App.2d 172, 175.) A finding that a contract was assigned will be upheld if supported by substantial evidence. (Cf. id. at p. 176.)
Here, there was no evidence that MCCE assigned SIA 1 to Morf or that he accepted any such assignment. To the extent the record on appeal contains any description of the transaction between Morf and MCCE, it is found in the testimony of MCCE’s principal, Morgan. At most, the record reflects that Morgan informed Morf about the existence of the SIA’s, that they were recorded against the property, and that anyone who purchased the property took subject to the SIA’s. These facts demonstrate that Morf purchased the property with knowledge the SIA’s were recorded against the property, but they do not support a conclusion that MCCE intended to assign SIA 1 to Morf, thus making Morf a party to the contract.
The nature of the transaction does not indicate Morf agreed to assume the obligations of SIA 1, including liability for creek and landslide repair on property located elsewhere in the Subdivision. He paid no money out of pocket, was not liable to pay the mortgage or property taxes as long as MCCE paid them, and could be bought out at any time by MCCE for a minimal sum. In light of the terms of the deal, there is no reason to believe he agreed to undertake costly obligations involving property other than lots he purchased. Accordingly, we conclude the trial court erred in concluding that Morf assumed SIA 1’s contractual obligations by virtue of an assignment from MCCE.
2. Covenant Running with the Land
“The primary characteristic of a covenant running with the land is that both liability upon it and enforceability of it pass with the transfer of the estate. The benefits or burdens pass by implication of law rather than under principles of contract.” (Anthony v. Brea Glenbrook Club (1976) 58 Cal.App.3d 506, 510; see Civ. Code, § 1460.)
Civil Code section 1468 contains the requirements that must be met for a covenant running with the land to be enforced against a covenantor’s successors. The statute “requires: (1) the benefited and burdened lands must be particularly described in the instrument creating the covenant, either a deed between the grantor and grantee or an agreement between landowners; (2) the covenantor’s successors must be expressly bound for the benefit of the covenantee’s land; (3) the covenant must concern the use, repair, maintenance, or improvement of the property or the payment of taxes and assessments and (4) the agreement must be recorded. [Citation.]” (Oceanside Community Assn. v. Oceanside Land Co. (1983) 147 Cal.App.3d 166, 174, fn. 4, disapproved on other grounds in Citizens for Covenant Compliance v. Anderson (1995) 12 Cal.4th 345, 366.)
When a covenant does not run with the land because one of the statutory requirements is lacking, a court may nonetheless enforce the covenant as an equitable servitude. (B.C.E. Development, Inc. v. Smith (1989) 215 Cal.App.3d 1142, 1146; 12 Witkin, Summary of Cal. Law, supra, Real Property § 440, p. 512;) Equitable enforcement of covenants may be granted in the case of affirmative obligations as well as restrictions on the use of property. (See Relovich v. Stuart (1931) 211 Cal. 422, 427; 12 Witkin, Summary of Cal. Law, supra, Real Property § 445, p. 517.)
Some commentators have postulated “that covenants that run with the land and equitable servitudes should be, or possibly have been, merged into a single doctrine. [Citations.]” (Citizens for Covenant Compliance v. Anderson (1995) 12 Cal.4th 345, 354-355.) The Supreme Court is aware of the issue but has not addressed it. (Id. at p. 355.) For our purposes, any distinction between covenants running with the land and equitable servitudes is irrelevant.
The City contends the requirements of a covenant running with the land are easily met. It claims the affected properties are sufficiently described in SIA 1, there is a clear expression of the intent to bind the covenantor’s successors, the covenants concern the repair of the property, and the agreement has been recorded.
Morf takes exception to the conclusion that SIA 1 contains a clear expression of the intent to bind successor owners to all of the terms and conditions of SIA 1. He contends the relevant provision of SIA 1 merely expresses an intent that successive property owners will be bound by a single provision in SIA 1 that gives the City the right to revert the lots to acreage following a breach. We disagree.
The pertinent provision in SIA 1 is found in paragraph 13.B, which states in its entirety as follows: “This Agreement, and particularly this provision, shall be binding upon and inure to the benefit of the parties’ successors, heirs and assigns, and by the recordation hereof (which said recordation shall be effected by the City), it is the intention of the parties to give notice to and bind their successors, heirs and assigns hereto. The parties intend that this Agreement and its terms and conditions shall run with the land and shall be deemed a covenant running with the land and an equitable servitude. This Section 13 shall survive termination of this Agreement for any reason.” (Italics added.)
Morf contends the language “particularly this provision” in paragraph 13.B is a reference to the rest of paragraph 13, which in general provides that the City has the right to revert the lots to acreage upon a breach of the agreement. According to Morf, paragraph 13.B should be interpreted to mean that the only terms and conditions of SIA 1 that are binding upon successors are those contained in paragraph 13.
The plain language of paragraph 13.B is inconsistent with Morf’s interpretation. The paragraph provides that “[t]his Agreement” is binding upon successors. Further, the paragraph states without qualification that “[t]he parties intend that this Agreement and its terms and conditions shall run with the land and shall be deemed a covenant running with the land and an equitable servitude.” (Italics added.) We agree with the trial court that paragraph 13.B. applies to the entire agreement and not just paragraph 13. The intent was to make all of the terms and conditions of SIA 1 binding upon successors.
Nevertheless, there is a problem with making all of the terms and conditions of SIA 1 binding upon successor owners of individual lots, as Morf points out. In particular, such a result would impose an affirmative obligation upon Morf to repair property he does not even own. SIA 1’s obligations involve improvements and repairs throughout the entire 54-acre Subdivision. However, Morf did not succeed to ownership of the entire Subdivision. Instead, his property interest is limited to lots 4 through 7.
Civil Code section 1467 provides a solution for the dilemma Morf has identified. That section provides: “Where several persons, holding by several titles, are subject to the burden or entitled to the benefit of a covenant running with the land, it must be apportioned among them according to the value of the property subject to it held by them respectively, if such value can be ascertained, and if not, then according to their respective interests in point of quantity.” In other words, when several transferees succeed to different portions of an original parcel of land, the benefits and burdens of any covenant running with the original parcel of land must be apportioned among them. (See 12 Witkin, Summary of Cal. Law, supra, Real Property § 436, p. 508.)
The trial court erred by failing to equitably apportion the burdens of SIA 1 to Morf according to the nature of his interest. Accordingly, upon remand the trial court shall reconsider the scope of Morf’s obligations under SIA 1 in light of the principles discussed in this opinion. The court may order injunctive relief against Morf to enforce obligations under SIA 1 that run as covenants with the land, but only to the extent those obligations are proportionate and equitable given the extent of his property interest. (Cf. Oceanside Community Assn. v. Oceanside Land Co., supra, 147 Cal.App.3d at p. 177 [court imposed equitable lien on property in lieu of injunction because it was inequitable to hold successor liable to perform covenant].)
D. Specific Performance of SIA 2
The trial court directed specific performance of SIA 2, as amended, ordering MCCE Investors to deliver documents conveying property interests in lots 8 through 37 to the Open Space District consistent with the terms of the ITA and the First Amendment to SIA 2. The court further directed MCCE Investors and Morf to convey a 20-foot wide access easement to lots 8 through 37, with the caveat that the access easement shall not unreasonably restrict the ability of MCCE Investors and Morf to build upon the remaining lots not conveyed as property interests to the Open Space District.
On appeal, MCCE contends the ITA expired by its own terms after one year and therefore cannot be specifically enforced. The contention lacks merit.
By executing the ITA, MCCE agreed to make an irrevocable offer for a period of one year to convey property interests to the Open Space District under the terms and conditions set forth in the ITA. The ITA names the City as an intended third-party beneficiary with power to enforce its terms. In addition, the First Amendment to SIA 2 provides that any failure by MCCE Investors to timely comply with its obligations to take a Preservation Action would constitute a material breach of SIA 2.
During the one-year offer period, MCCE failed to convey the property interests to the Open Space District “under the terms and conditions” of the ITA. Instead, MCCE proposed additional terms and conditions that were unacceptable to the Open Space District. Further, MCCE was required to deliver, by no later than December 31, 2002, fully executed and recordable deeds and easements in the form attached to the ITA. It did not do so. Consequently, MCCE breached both the ITA and SIA 2, as amended. Specific performance is a proper remedy to compel MCCE to satisfy the promise it breached during the one-year offer period.
MCCE purports to justify its noncompliance with the ITA by claiming the Open Space District proposed an access easement that would have made it impossible to build on lot 7. However, MCCE Development, which was a party to the ITA and the owner of lot 7 at the time the ITA was entered, had agreed to grant a 20-foot wide easement to the Open Space District, with the ultimate location of the easement to be determined by the Open Space District. The easement proposal was contemplated by the terms of the agreement and did not justify nonperformance by MCCE. Further, the Open Space District’s representative testified he visited the site with a surveyor and concluded issues concerning easement access could have been resolved.
To conclude otherwise would allow a party who fails to perform contractual obligations until the time for performance has expired to claim the contract is unenforceable by way of specific performance. The mere fact that the time to perform has passed does not preclude specific performance. In the case of a contract for the sale of real property, which is presumptively subject to specific performance (Civ. Code, § 3387), the time for performance will have typically passed by the time a party seeks specific performance of the contract. Yet no one could legitimately claim that specific performance is barred as a remedy simply because the plaintiff did not seek relief for a breach until after the time escrow was set to close. (Bravo v. Buelow (1985) 168 Cal.App.3d 208, 210 [specific performance awarded even though buyer did not seek relief until after escrow closing date].) Further, the purpose behind an award of compensation incident to a decree of specific performance is that a party should be compensated for losses incurred by the delay between the date a contract was to be performed and the date it is performed pursuant to a decree of specific performance. (See id. at p. 213.) Thus, such an award of incidental compensation rests upon the notion that specific performance may be ordered even after the time for performance has run.
The cases on which MCCE relies do not aid its position. In Buckmaster v. Bertram (1921) 186 Cal. 673, 678, the court held that when a plaintiff seeks a damage remedy for a breach of a contract to sell property, and the defendant sells the property in reliance on the party’s election of a damage remedy, the plaintiff cannot thereafter seek specific performance. Specific performance was precluded because the defendant sold the property in reliance on the plaintiff’s election of remedies, not because the time for performance had passed. In Zigas v. Superior Court (1981) 120 Cal.App.3d 817, 827, another case relied upon by MCCE, public housing tenants sought to enforce a contract between their landlord and the Department of Housing and Urban Development governing the maximum amount of rent that could be charged. The court explained that specific performance became “moot” after the contract expired. (Id. at p. 841.) This result is not surprising. Specific performance would have altered the nature of the agreement by extending the term governing maximum rents, thus requiring the landlord to limit the amount of rent charged beyond the time period contemplated by the agreement. Here, by contrast, enforcing the ITA and SIA 2 gives the City precisely what it was promised under those agreements.
MCCE also claims the court’s decree of specific performance is inequitable because it destroys the consideration MCCE was to receive for entering into SIA 2. MCCE complains that instead of being able to donate lots 8 through 37 to the Open Space District and take a tax deduction, it is now forced to retain title to many of the lots and grant a conservation easement to the Open Space District. According to MCCE, this result exposes it to continuing liabilities associated with the properties it must retain. Plus, it claims that transferring fee title to some of the lots under court order is hardly a “donation” that could qualify for the favorable tax treatment that motivated it to enter into SIA 2.
The trial court took the equities into consideration when it ordered specific performance of SIA 2. To be sure, the transfer of property interests under the ITA results in a less favorable outcome to MCCE than an outright transfer of lots 8 though 37 to the Open Space District, as was anticipated under the original SIA 2. However, the court observed that “MCCE was aware of the difficulties of this Subdivision project from the outset,” noting that the price paid by MCCE for the Subdivision ($200,000) reflected an understanding of the inherent problems with the project.
Moreover, MCCE has received gross proceeds of over $3.8 million from the sale of lots 1 through 3, yet it has still failed to fulfill its obligations to complete creek and landslide repairs, despite having received $865,000 in settlement of a claim arising out of the landslide. In addition, MCCE bargained for the ITA after the landslide that changed the nature of the project. Thus, MCCE cannot be heard to complain the ITA is unfair because it saddles MCCE with ongoing liabilities associated with the properties. With respect to the supposed loss of a tax benefit, MCCE has abandoned the issue by failing to offer any authority to support the claim. (Downey Savings & Loan Assn. v. Ohio Casualty Ins. Co. (1987) 189 Cal.App.3d 1072, 1090.) Considering all the circumstances, we conclude that any claimed inequities do not compel reversal of the court’s decree of specific performance.
MCCE Investors argues the court’s decree compels it to perform an illegal act by conveying an interest in land it never owned, i.e., lot 7, which is now owned by Morf. The argument is meritless. MCCE Development owned lot 7 and was a party to the ITA. The Open Space District proposed an access easement over lot 7 pursuant to the ITA at a time when MCCE Development owned the property. Under the terms of the ITA, MCCE Development was obliged to grant the 20-foot easement. According to MCCE’s principal, Morgan, Morf took title to lot 7 with full knowledge of the SIA’s and the dispute between the parties. There is nothing inequitable or “illegal” in requiring Morf to convey a 20-foot easement across property he purchased with full knowledge of the obligations attached to the property.
Further, the court’s decree anticipates a court-supervised resolution that will relocate the access easement where it will not unreasonably restrict the ability to build upon the remaining lots that were not conveyed as property interests to the Open Space District. According to the Open Space District’s representative, it is possible to preserve lot 7 as a buildable lot and still convey an easement.
We conclude the court acted within its discretion by ordering specific performance of SIA 2, as amended, and by compelling performance of the ITA.
E. Gate Removal
The judgment compels MCCE and Morf to remove and dispose of the gate blocking vehicular access to lots 4 through 7, and it requires them to design and install bollards as specified in the Fifth Amendment to SIA 1. MCCE and Morf contend specific performance of the agreement to remove the gate is unwarranted because the City had an adequate remedy at law for a breach of the Fifth Amendment to SIA 1.
The trial court articulated two separate grounds for its order compelling removal of the gate and installation of bollards. First, there was a breach of the Fifth Amendment to SIA 1, which required MCCE to take the actions that are the subject of the court’s order. Second, the presence of the gate constitutes a trespass across the City’s property, described as Fairway Drive, and it was built without necessary building permits.
MCCE and Morf do not dispute that the gate obstructs a public street. At most, they contend the evidence shows the City intends to abandon the public street once the development is complete. However, there is apparently no dispute that Fairway Drive is currently a public right of way. MCCE’s principal, Morgan, testified he “did not disagree” with the assessment that the road beyond the gate is a public street. “Abandonment of a street must be accomplished in the manner provided by statute since streets are in law the property of all the people of the state. [Citations.]” (City of Imperial Beach v. Algert (1962) 200 Cal.App.2d 48, 51.) Here, there has been no abandonment of the street.
Anything that obstructs the free passage or use of a public street constitutes a nuisance. (Civ. Code, § 3479.) A court is authorized to order an injunction to remedy a public nuisance. (Code Civ. Proc., §§ 731, 526.) Indeed, an injunction is the “traditional method” of abating a nuisance, and an aggrieved party is not obliged to forego its right to an injunctive remedy simply because it may seek damages in the alternative. (See L.A. Brick etc. v. City of Los Angeles (1943) 60 Cal.App.2d 478, 486.) Although MCCE and Morf cite the general principle that an equitable remedy will not lie when an adequate remedy at law exists, they have offered no authority for the proposition that one must establish the inadequacy of the legal remedy as a prerequisite to the issuance of an injunction authorized by statute to remedy a public nuisance. (Cf. In re Marriage of Van Hook (1983) 147 Cal.App.3d 970, 984, fn. 10 & 985 [inadequate legal remedy is separate ground for, but not prerequisite to, injunctive relief authorized by statute].) We conclude there was no abuse of discretion in the issuance of an injunction directing removal of the gate.
Because the nuisance—i.e., the obstruction of a public street—may be remedied without requiring installation of the bollards, the court presumably did not have authority to direct MCCE and Morf to install bollards pursuant to its statutory authority to remedy a public nuisance. Nevertheless, MCCE breached its contractual obligation to install the bollards. It may be that a damages remedy would have been adequate to remedy this specific breach of a discrete obligation contained in the agreements between MCCE and the City. However, in light of our conclusion there was no abuse of discretion in directing specific performance of MCCE’s remaining obligations under SIA 1 and SIA 2, or in ordering removal of the gate, we cannot say it was error to order specific performance of the related, discrete obligation to install bollards.
Finally, Morf argues there was no basis to order him to remove the gate. He reiterates his arguments that he was not a party to the agreements and did not assume their obligations, and he contends he was not the one who trespassed on the City’s property. For the reasons explained above in section I.C., Morf is liable to perform the obligations under the SIA’s to the extent they constitute covenants running with the land and it is equitable to apportion those obligations to him in light of his property interest in the Subdivision. Thus, in connection with the trial court’s reconsideration of the scope of Morf’s obligations under SIA 1 upon remand (see section I.C.2 ante), the court should determine the extent of Morf’s obligation, if any, to remove the gate and install bollards as set forth in the Fifth Amendment to SIA 1.
Accordingly, we find no abuse of discretion in ordering MCCE to remove the gate blocking Fairway Drive and to install bollards. Upon remand, the trial court shall determine the extent to which Morf shares that obligation with MCCE.
II. Attorney Fees
MCCE and Morf appeal the attorney fee award of $476,713 in favor of the City, contending the court erred by (1) declaring the City the prevailing party on the contract, (2) awarding fees incurred after the City rejected a settlement proposal, (3) awarding fees the City Attorney billed for appearing at trial, where the City Attorney served as a witness, and (4) holding Morf liable for attorney fees under the agreements between MCCE and the City. We agree that Morf cannot be held liable for contractual attorney fees but reject the remaining challenges to the attorney fee award.
A. Morf’s Liability for Contractual Attorney Fees
As an initial matter, assuming the fee award is otherwise proper, we consider whether it is appropriate to require Morf to pay attorney fees pursuant to a contractual fee-shifting provision. We conclude there is no basis for requiring Morf to pay the City’s attorney fees.
MCCE and Morf point out it is not clear from the court’s order whether Morf, as well as MCCE Development and MCCE Investors, is required to pay the City’s attorney fees. For that matter, it is not entirely clear from the court’s order which parties are actually directed to pay the City’s fees. The City argues otherwise, contending that the parties all understood that Morf was liable to pay attorney fees. Because the order is susceptible to the City’s interpretation, we will assume the trial court intended to order Morf as well as MCCE to pay the City’s attorney fees.
“Attorney fees are not recoverable as costs unless a statute or contract expressly authorizes them. [Citation.]” (California Wholesale Material Supply, Inc. v. Norm Wilson & Sons, Inc. (2002) 96 Cal.App.4th 598, 604.) Here, there is no statutory basis for an award of fees, and the only contractual basis for such an award against Morf is found in SIA 1. However, as we determined above in section I.C., Morf is not a party to SIA 1. He is not a signatory of SIA 1, and there was no assignment of SIA 1 by MCCE to Morf. Accordingly, there is no justification for treating Morf as a party to SIA 1 and requiring him to pay the City’s attorney fees on that basis.
The City contends Morf is liable for attorney fees under SIA 2 as well because SIA 1 and SIA 2 contain cross-default provisions and are part of a single contract. Our conclusion that Morf is not a party to SIA 1 applies equally to SIA 2.
The City contends Civil Code section 3395 provides a separate basis for requiring Morf to pay the City’s attorney fees. We disagree.
Civil Code section 3395 provides in relevant part that “[w]henever an obligation in respect to real property would be specifically enforced against a particular person, it may be in like manner enforced against any other person claiming under him by a title created subsequently to the obligation....” According to the City, Morf is liable for attorney fees under SIA 1 because he took title to the property with knowledge the SIA’s had been recorded against the lots he purchased.
The City’s theory was rejected in Glynn v. Marquette (1984) 152 Cal.App.3d 277. There, the Court of Appeal explained that Civil Code section 3395 “is designed to prevent a seller from arbitrarily frustrating the buyer’s remedy of specific performance by conveying the property to a third person who has notice of the buyer’s interest. [Citations.]” (Id. at p. 281.) The dispute between MCCE and the City does not implicate the concern addressed by Civil Code section 3395, i.e., preserving a buyer’s specific performance remedy when property is conveyed to a third party by a seller. In any event, the statute “does not render the third party liable in damages for other types of promises of the seller” and does not apply to a “promise to pay the prevailing party’s attorney’s fees in the event of litigation on the contract.” (Ibid.) The prevailing party has an adequate remedy at law by seeking attorney fees from the party to the contract. There is consequently no need to require a successor property owner to specifically perform the attorney fee provision of the contract. (Ibid.) Civil Code section 3395 merely provides a limited form of relief for buyers but does not make a successor property owner a party to the contract between a buyer and seller. (See id. at p. 282.) To the extent Civil Code section 3395 has any application to this dispute, it plainly does not impose an obligation upon Morf to pay the City’s attorney fees pursuant to SIA 1.
The City further argues that the obligations under SIA 1 and SIA 2, including the promise to pay attorney fees to a prevailing party in the event of litigation, are covenants running with the land and equitable servitudes that are binding upon Morf. While certain obligations under the SIA’s may indeed run with the land, the attorney fee provision is not such an obligation.
A covenant running with the land must “relate to the use, repair, maintenance or improvement of, or payment of taxes and assessments on” the land or some part of the land. (Civ. Code, § 1468, subd. (c).) This requisite of a covenant running with the land is sometimes referred to as the requirement that the covenant “ ‘touch or concern the land’ ” in order to be enforceable. (See B.C.E. Development, Inc. v. Smith, supra, 215 Cal.App.3d at p. 1146.) Here, the attorney fee provision does not concern the “use, repair, maintenance or improvement” of the property, nor does it relate to “taxes or assessments” on the property. The promise to pay attorney fees does not directly benefit the land. (See Civ. Code, § 1462.) Consequently, the attorney fee provision cannot be enforced against Morf as a covenant running with the land.
Because there is no contractual or other basis for requiring Morf to pay the City’s attorney fees, the attorney fee award must be reversed to the extent it applies to Morf.
B. Prevailing Party Determination
In its order awarding attorney fees, the trial court declared that, “[h]aving received a judgment of specific performance on its claim of breach of [SIA 1 and SIA 2], the City is deemed the prevailing party as to these contracts.” MCCE contends the trial court abused its discretion in determining the City was the prevailing party entitled to an award of attorney fees. The contention lacks merit.
In an action on a contract containing an attorney fee provision, Civil Code section 1717 governs the court’s determination of the prevailing party that is entitled to recover attorney fees. Subdivision (b)(1) of Civil Code section 1717 provides that “the party prevailing on the contract shall be the party who recovered a greater relief in the action on the contract.” A court may determine there is no party prevailing on the contract. (Ibid.)
In Hsu v. Abbara (1995) 9 Cal.4th 863, 875-876, our Supreme Court explained that when a party obtains a “ ‘simple, unqualified win’ ” by completely prevailing on, or defeating, the contract claims in the action and the contract contains a provision for attorney fees, the successful party is entitled to attorney fees as a matter of right, eliminating the trial court’s discretion to deny fees under Civil Code section 1717. “If neither party achieves a complete victory on all the contract claims, it is within the discretion of the trial court to determine which party prevailed on the contract or whether, on balance, neither party prevailed sufficiently to justify an award of attorney fees.” (Scott Co. v. Blount, Inc. (1999) 20 Cal.4th 1103, 1109.)
When determining the prevailing party under Civil Code section 1717, the trial court “is to compare the relief awarded on the contract claim or claims with the parties’ demands on those same claims and their litigation objectives as disclosed by the pleadings, trial briefs, opening statements, and similar sources.” (Hsu v. Abbara, supra, 9 Cal.4th at p. 876.) “[I]n determining litigation success, courts should respect substance rather than form, and to this extent should be guided by ‘equitable considerations.’ For example, a party who is denied direct relief on a claim may nonetheless be found to be a prevailing party if it is clear that the party has otherwise achieved its main litigation objective. [Citations.]” (Id. at p. 877, italics omitted.)
A trial court has wide discretion in determining which party is the prevailing party under Civil Code section 1717. (Sears v. Baccaglio (1998) 60 Cal.App.4th 1136, 1158.) We will not disturb the decision absent a clear showing that the court abused its discretion. (Ibid.)
MCCE contends the court abused its discretion in declaring the City the prevailing party because the City failed to achieve its “litigation objective.” According to MCCE, the City’s primary objective was to terminate the project and recover damages for the breach of SIA 1. Instead, the City was forced to allow MCCE to complete the project, a result that MCCE claims the City did not want.
We do not agree with MCCE’s narrow view of the City’s “litigation objective.” The City may have preferred an award of damages to a decree of specific performance, but it nonetheless chose to pursue the remedies in the alternative. Merely because the trial court awarded the City its second choice of a remedy does not mean the City failed to achieve the “greater relief” on the contract.
MCCE implies the judgment gives the City no more than MCCE was prepared to do all along. The record belies this claim. In its first amended complaint, MCCE sought an order declaring that it had completed all of the required improvements on the property. It also sought an injunction preventing the gate blocking Fairway Drive from being removed, and it asked to be relieved from any obligation to convey an open space easement to the Open Space District under the terms and conditions required by the Open Space District. Clearly, MCCE sought to avoid critical obligations under its agreements with the City and the Open Space District.
The judgment compels MCCE to satisfy the contractual obligations the City has consistently sought to enforce. It requires MCCE to perform necessary landslide repairs and creek restoration work. MCCE Investors is required to convey property interests in lots 8 through 37 to the Open Space District under the terms of the ITA. And, MCCE must remove the gate blocking Fairway Drive and install bollards.
It is true the judgment requires the City to perform its obligations under the agreements. Among other things, the City must not unreasonably withhold approval for building plans and permits. As MCCE points out, the result is that the City must allow reasonable development on the remaining buildable lots, i.e., lots 4 through 7. However, this requirement of counterperformance by the City does not compel the conclusion there is no prevailing party. In general, a party awarded specific performance of a contract must counterperform its obligations under the contract. (See Civ. Code, § 3386, subd. (b).) A party seeking specific performance must be prepared to tender performance or satisfy its obligations under the contract, to the extent it has not already done so. It cannot be viewed as a loss on a contract claim when the court orders the party seeking specific performance to do what it was already prepared to do. Thus, an order of specific performance directing that the party seeking to enforce the contract counterperform its contractual obligations does not signify that the party failed to secure a “win” on its contract claims.
At most, the requirement that the City perform its obligations under the contract and allow the Subdivision to be completed renders the judgment something less than a simple and unqualified win. But even in such a case, when neither party achieves a complete victory on all of the contract claims, the trial court retains broad discretion to determine the prevailing party.
MCCE also urges that we take into account the City’s rejection of a settlement offer that MCCE claims would have given the City more than it achieved at trial. MCCE argues it is error to conclude the City achieved its litigation objective when it had essentially rejected the relief contained in the judgment by turning down the settlement offer. As explained in greater detail in the following section of this opinion, we do not agree with MCCE that the terms of the proposed settlement, as compared to the judgment, provided comparable or greater relief to the City. Suffice it to say the City’s rejection of the settlement offer does not bear on whether it achieved its litigation objectives at trial.
We are not persuaded it was error to conclude the City achieved the greater relief on the contracts. Accordingly, there was no abuse of discretion in determining the City was the prevailing party for purposes of awarding attorney fees.
C. Fees Incurred After City Rejected Settlement Offer
The trial court awarded the City most of the fees it incurred after the City Council rejected a settlement offer made on the eve of trial. In its order awarding fees, the court noted that “[e]ven though these results [i.e., the judgment] would seem to have been possible without trial, the unsuccessful attempts to settle on the eve of trial did not achieve the level of precision required by [Code Civ. Proc.,] § 998 and should not serve as a basis for this court’s cost-shifting considerations.”
MCCE’s settlement offer was not made pursuant to Code of Civil Procedure section 998 (hereafter section 998). Nevertheless, MCCE contends the trial court erred in awarding fees incurred by the City after it rejected the settlement offer, arguing in effect that the City should not be rewarded for pursuing a costly trial that achieved little more than the relief offered in the rejected attempt at a settlement.
On the eve of trial, the City indicated it was interested in reviving settlement negotiations and requested a short delay in commencing the trial. The City’s attorney, the City Manager, and MCCE reached a tentative agreement that was memorialized in a “Memorandum of Settlement” presented to the City Council for approval. The City Council rejected the agreement by a three to one vote.
The proposed settlement contained the following provisions, among others: (1) MCCE would perform all creek and landslide repairs as well as complete the remaining subdivision improvements; (2) MCCE would agree to a lot line adjustment converting lots 4 to 7 from four lots to three; (3) MCCE would donate to the Open Space District lots 8-14, 19-24, and 25 (if wanted by the Open Space District); (4) MCCE would merge lots 15-18, 25 (if not wanted by the Open Space District), 26-37, and “Parcel F” into a single lot with a deed restriction or conservation easement precluding development on the merged lot except for one single family home and “related structures”; (5) The gate blocking Fairway Drive would remain in place, provided it complied with applicable building codes; (6) MCCE would agree to pay $500,000 to defray the City’s legal costs, fees, and cost recovery arrearages; and (7) MCCE would agree to deliver a certificate of deposit in an amount no less than $500,000 to be used by the City to complete the project in the event MCCE breached the settlement agreement.
Although the settlement proposal and the judgment share some of the same elements, such as the obligation to complete landslide and creek repairs, there are also significant differences between the two. Notably, the settlement would have allowed MCCE to keep the gate in place. More importantly, the settlement would have significantly altered MCCE’s obligation under the ITA to donate property interests to the Open Space District. In lieu of developing lot 7, the settlement anticipated that MCCE could develop a single family home and “related structures” on a large parcel composed of 17 individual lots that had been slated to be preserved as open space under the ITA by virtue of conservation easements.
Another critical term of the settlement offer is what the City refers to as the “poison pill,” which would have terminated the settlement if the City disapproved any of the permits or approvals to be sought by MCCE (other than lot line adjustments). If the agreement were terminated, the City would have been obligated to return the $500,000 it received for attorney fees, and the certificate of deposit ensuring MCCE’s performance would have been returned to MCCE. As the City points out, MCCE could have triggered the “poison pill” and terminated the agreement at any time simply by submitting an application it knew the City would not approve. Thus, the settlement offer effectively gave MCCE unilateral power to terminate its obligations and return the parties to the position they were in before trial.
“The basic premise of section 998 is that plaintiffs who reject reasonable settlement offers and then obtain less than the offer should be penalized for continuing the litigation. The harsh result of section 998 is that the plaintiff not only loses the right to recover his or her costs, but must also pay the defendant’s postoffer costs.” (Meister v. Regents of University of California (1998) 67 Cal.App.4th 437, 450 (Meister).)
MCCE does not suggest its settlement offer satisfies the statutory requirements of section 998, nor does it seek to recover its post-offer attorney fees from the City. Nevertheless, relying on the analysis in Meister, it contends the City’s rejection of its settlement offer should have precluded the City from recovering attorney fees incurred after rejecting MCCE’s settlement offer.
In Meister, the Sixth District Court of Appeal affirmed a trial court decision reducing an attorney fee award by the amount of fees incurred by the plaintiff after he declined an informal settlement offer. (Meister, supra, 67 Cal.App.4th at pp. 449-450.) The appellate court rejected the plaintiff’s argument that the trial court’s use of the informal offer undermined the public policy underlying section 998, reasoning that “the inapplicability of section 998 did not prevent the trial court from allowing the underlying policy concerns addressed by that section to guide its exercise of its discretion in this case.” (Id. at p. 450.) The court concluded that irrespective of section 998, the trial court retained discretion to consider a party’s rejection of a nonstatutory settlement offer “because it was based on the court’s assessment of whether the hours which plaintiff’s attorneys claimed to have expended on [the] litigation were ‘reasonably spent.’ ” (Id. at p. 449.)
In Greene v. Dillingham Construction N.A., Inc. (2002) 101 Cal.App.4th 418, 425 (Greene), Division Four of the First District Court of Appeal disagreed with the Sixth District’s reasoning in Meister. The Greene court held that section 998’s “punitive provisions... have no application to an informal settlement offer made during the course of a confidential mediation session.” (Greene, supra, 101 Cal.App.4th at p. 425.) “Not only would disclosure of the settlement offer violate Evidence Code section 1119, the penalties would frustrate the public policy favoring settlement that is served by mediation.” (Ibid., fn. omitted.) Further, according to the court, “the Meister court’s holding ignores the procedural protections afforded recipients of statutory section 998 offers. An offer pursuant to section 998 may not be withdrawn prior to trial or within 30 days after the offer is made, whichever occurs first. [Citation.] These protections are not necessarily provided in an informal settlement offer.” (Ibid.) While the court “agree[d] with the Meister court to the extent it recognized that the trial court has discretion to determine whether fees were reasonably spent, [it] decline[d] to follow [the Meister] holding that a trial court can consider an informal settlement offer in making that determination.” (Id. at p. 426.)
MCCE claims Greene is inapplicable here, arguing its holding applies only to informal settlement offers arrived at in mediation. MCCE asserts the settlement offer here was in writing, was published on the City’s website, and was the subject of a public meeting. Thus, according to MCCE, the concerns raised by the Greene court are not present here.
We observe that MCCE’s assertions about the public nature of the offer are not supported by its citations to the appellate record. Because the City does not contest the assertion that the settlement offer was publicly debated, we will assume for purposes of this analysis it was not a confidential settlement offer.
We need not decide whether Greene or Meister is the better reasoned analysis, or whether Greene is inapplicable under the specific facts of this case. Even if we were to apply the analysis in Meister, we would conclude there was no abuse of discretion in awarding post-offer attorney fees to the City. Meister merely stands for the proposition that a court may consider a party’s rejection of an informal settlement offer for purposes of determining whether post-offer fees were reasonably spent, but the decision also acknowledges that “courts have broad discretion in determining the amount of a reasonable attorney’s fee award.” (Meister, supra, 67 Cal.App.4th at pp. 452-453.)
The court below considered the settlement offer as a ground for shifting fees but declined to base its decision on the rejected offer because it “did not achieve the level of precision required by [section 998].” In other words, it was too difficult to place a value on the settlement offer for purposes of comparing it with the judgment. We agree with the trial court’s assessment.
In Greene, among other reasons for refusing to consider the rejected settlement offer as a basis for shifting fees, the court noted that the offer at issue included a condition requiring the terms of the settlement to remain confidential, making it difficult for a court to compare the value of that offer to a judgment arrived at in a public forum. (Greene, supra, 101 Cal.App.4th at p. 425; see also Barella v. Exchange Bank (2000) 84 Cal.App.4th 793, 803 [confidentiality provision too subjective for purposes of shifting costs under section 998].) As a general matter, when a settlement offer involves non-monetary terms, such “other terms and conditions may render it difficult to accurately value the monetary term of the offer so the court cannot fairly determine whether the damages award is ‘more favorable’ or less favorable than the statutory offer.” (Valentino v. Elliott Sav-On Gas, Inc. (1988) 201 Cal.App.3d 692, 698.)
In this case, it is extremely difficult to evaluate the settlement offer because it primarily consists of non-monetary terms. The trial court would necessarily have to place some subjective value on different components of the settlement offer and the judgment in order to compare the two. For instance, under the settlement offer, MCCE would have retained the right to develop a home on 17 additional lots. Under the judgment, those lots will be set aside as open space and left undeveloped. How does one assign a value to each of these outcomes? The task is made all the more difficult because the law recognizes that real property is unique and that pecuniary compensation is presumptively inadequate to remedy a breach of an agreement to transfer real property. (See Civ. Code, § 3387.) The trial court was amply justified in concluding that the settlement offer lacked the precision required to justify shifting fees among the parties.
By contrast, in Meister, the settlement involved a monetary offer in combination with relatively straightforward injunctive relief. (Meister, supra, 67 Cal.App.4th at pp. 442-443.)
Furthermore, even if one were to attempt to compare the settlement offer and the judgment, even a cursory review would indicate the judgment is superior to the settlement offer from the City’s perspective. The right to build a home and related structures on a vast tract of land surrounded by open space is plainly of much greater value to MCCE than the right to build a home on lot 7. Under the settlement, the City would have had to give up this valuable land and allow the property to be developed in an area that was intended to be set aside as open space. Furthermore, the “poison pill” provision giving MCCE the right to terminate the settlement if the City withheld permits or approvals would have effectively given MCCE a unilateral option to terminate the settlement. MCCE has no such unilateral power to avoid the judgment.
Under the circumstances, it was not an abuse of discretion for the trial court to award attorney fees incurred by the City after it rejected MCCE’s settlement offer.
D. Fees Billed by City Attorney at Trial
Although MCCE points out that Walter served as a witness at trial, it offers no indication that the City sought to recover Walter’s fees associated with the time he was testifying at trial.
“[A]n experienced trial judge is in a much better position than an appellate court to assess the value of the legal services rendered in his or her court, and the amount of a fee awarded by such a judge will therefore not be set aside on appeal absent a showing that it is manifestly excessive in the circumstances. [Citation.]” (Children’s Hosp. & Medical Center v. Bonta΄ (2002) 97 Cal.App.4th 740, 782.) “An abuse of discretion is shown when the [attorney fee] award shocks the conscience or is not supported by the evidence. [Citations.]” (Jones v. Union Bank of California (2005) 127 Cal.App.4th 542, 549-550.) MCCE has made no such showing here.
Walter has long been involved in this matter. When it became apparent he would be called as a witness at trial, he associated in new counsel, Michael Senneff, to represent the City at trial. Nevertheless, Walter continued to play a role as an advocate at trial, even though he did not try the case before the jury. He represented the City as an advocate before the court in connection with motions in limine, evidentiary issues, jury instructions, and post-trial motions.
In response to the claim the City should not recover its fees for Walter’s work during trial, the trial court stated: “Based on this court’s close involvement in this matter, the court recognizes that Mr. Walter has provided valuable services that were separate and distinct from those provided by Mr. Senneff. The need for those services at trial should come as no surprise to cross-defendants.” Nonetheless, the court exercised its discretion based upon its knowledge of the case to reduce by 20 percent the portion of Walter’s fees incurred since the City retained Senneff.
MCCE does not address or mention the court’s exercise of discretion to reduce Walter’s fees by 20 percent, suggesting instead that we should reach a different conclusion than the trial court and deny Walter’s fees altogether. We decline to do so. There is nothing shocking or insupportable about the trial court’s award of Walter’s fees, particularly in light of the 20 percent reduction to account for any duplication of effort among Walter and Senneff. The trial court was in the best position to make an assessment of the value of Walter’s services. MCCE has offered no reason for us to reject that assessment.
E. Reversal Based on Partial Reversal of Underlying Judgment
Finally, we consider MCCE’s contention that the award of attorney fees and costs in favor of the City must be reversed if we reverse the underlying judgment as to any or all of the appellants. MCCE cites the principle that an award of costs, including attorney fees, “ ‘falls with the reversal of the judgment on which it is based.’ [Citations.]” (Allen v. Smith (2002) 94 Cal.App.4th 1270, 1284.)
Ordinarily, we would address this issue first because it is potentially dispositive of the entire attorney fee appeal. We address the issue last because it is unclear, in the abstract, whether our partial reversal of the main judgment necessitates reversing the attorney fee award in its entirety. Having now considered MCCE and Morf’s claims of error with respect to the attorney fee award, we proceed to address whether the partial reversal has any bearing on the fee award or the specific challenges to the award.
As explained earlier in this opinion (see sections I.C.2 and I.E ante), we are reversing the underlying judgment as to Morf with directions to reconsider the scope of his obligations under SIA 1. In all other respects, we affirm the underlying judgment.
As an initial matter, the question arises whether such a partial reversal is appropriate in light of the equitable nature of the remedy ordered by the court. In other words, must the lower court be given the opportunity to reconsider the entire judgment if we change or limit one component of the equitable remedy ordered by the court.
“An appellate court may reverse a judgment in part and order retrial of a single issue if it is distinct and severable from the remaining issues.” (Curties v. Hill Top Developers, Inc. (1993) 14 Cal.App.4th 1651, 1656.) “But where a limited retrial might be prejudicial to either party, failure to grant a new trial on all related issues is an abuse of discretion.” (Id. at pp. 1656-1657.)
There is no reason to believe our limited remand prejudices any of the parties. Our disposition does not change the nature or extent of the relief secured by the City. MCCE remains liable to satisfy the judgment in its entirety, including performing its obligations under SIA 1, SIA 2, and the ITA. The only change is the extent to which Morf shares responsibility for performing those obligations. The situation is similar to one in which a retrial is ordered on the apportionment of damages among defendants. In such a case, the apportionment determination may be made without having to reconsider the proper amount of damages awarded in the aggregate. (See O’Kelly v. Willig Freight Lines (1977) 66 Cal.App.3d 578, 583.) Similarly, in this case the determination of the scope of Morf’s obligations may be made without having to reconsider MCCE’s obligations or the overall relief afforded to the City. There is nothing to suggest the trial court would exercise its discretion any differently with respect to the remedies imposed upon MCCE if given the opportunity to do so following our limited remand as to Morf.
The question remains whether our limited reversal of the underlying judgment compels reversal of the postjudgment attorney fee award in its entirety. In Ventas Finance I, LLC v. Franchise Tax Bd. (2008) 165 Cal.App.4th 1207, 1211-1212, the Court of Appeal reversed a postjudgment attorney fee award in its entirety following a partial reversal of a judgment directing the Franchise Tax Board to pay a refund to a taxpayer. The court upheld the refund but remanded with directions to redetermine and limit the amount of refund. As a consequence of its partial reversal of the judgment, the appellate court also reversed the postjudgment attorney fee award in its entirety, reasoning that it could not say with certainty whether the trial court would exercise its discretion to award attorney fees in the same manner in light of the limited reversal. (Id. at p. 1212.) Among other things, the appellate court pointed out its limitation of the refund could affect the trial court’s discretionary determination of whether the plaintiff was a “successful party” for purposes of awarding statutory attorney fees. In addition, the partial reversal could affect the trial court’s determination of whether the litigation had succeeded in benefiting a large ascertainable class of similarly situated persons. (Id. at p. 1234.)
In this case, our partial reversal as to Morf does not affect the outcome of the litigation between MCCE and the City. The City is still entitled to the same specific performance of contractual obligations from MCCE, regardless of Morf’s liability to contribute to that performance. Thus, our limited remand does not suggest any different outcome with respect to whether the City was the prevailing party as against MCCE for purposes of awarding attorney fees. (But see Zagami, Inc. v. James A. Crone, Inc. (2008) 160 Cal.App.4th 1083, 1097 [limited reversal on damages required reconsideration of prevailing party issue].) Nor does our limited remand concern or otherwise affect the award of specified fees that are challenged by MCCE on appeal, including fees incurred after the City rejected a settlement proposal and certain fees billed by the City Attorney. The trial court’s assessment of whether to include such fees in the award did not turn on the scope of the remedy as to Morf, which is the sole issue left to be determined on remand.
Therefore, we conclude that our partial reversal of the judgment as to Morf does not, by itself, compel reversal of the fee award in its entirety. However, for reasons explained above, we nonetheless reverse the attorney fee award as to Morf, who is not liable for contractual attorney fees. This disposition requires a reassessment of the amount of the fee award, to avoid a result that compels MCCE to pay for fees incurred by the City that relate solely to Morf’s involvement in the case. It may be that the existing fee award represents a proper measure of the fees reasonably incurred by the City in its contract dispute with MCCE, regardless of whether Morf is also considered a party to the contract. However, that decision rests with the trial court. We express no opinion on what type of adjustment—if any—to the fee award might be appropriate to account for our reversal of the fee award as to Morf.
Although we must remand the matter to the trial court to reconsider the amount of the fee award in light of our disposition as to Morf, we emphasize that this limited remand does not require reconsideration of the issues MCCE has raised in the fee appeal—i.e., the determination the City is the prevailing party, the award of post-offer fees, and the partial award of fees for the City Attorney’s work at trial.
The January 18, 2007, judgment is reversed to the extent it orders appellant George Morf to specifically perform obligations under Subdivision Improvement Agreement 1, as amended. The matter is remanded for further proceedings consistent with this opinion for the limited purpose of reconsidering the scope of the equitable remedy as to Morf. In all other respects, the January 18, 2007, judgment is affirmed.
The September 30, 2007, order is reversed to the extent it requires appellant George Morf to pay attorney fees to respondent City of Novato. The matter is remanded for further proceedings consistent with this opinion for the limited purpose of reconsidering the amount of the City’s attorney fee award in light of our disposition as to Morf. In all other respects, the September 30, 2007, attorney fee award is affirmed.
Each party shall bear its own costs on appeal.
We concur: Pollak, J., Jenkins, J.